<h1>Thoughts of the month</h1>
  <div class="thoughts">
    <div class="time"> September, 2011 </div>
    <div class="content">
      <p>
      Something is happening and it ain't pretty! A sense of global upheaval
      lingers in the air, ranging from Arab countries to Western nations and
      South-East Asia. Something is about to change radically in our world
      economy, a process that is driven by deleveraging, marginal growth and
      resource constraints.
      <p>
      We have arrived at a point where we should recognize that our societies
      can no longer function with the current monetary system in place. Fiat
      currencies and fractional-reserve banking have inflated a debt bubble to
      such proportions, it is unfeasible that the real, wealth-producing part
      of the economy can generate sufficient revenues to serve these debts as
      the world switches into zero-growth gear. At the heart of the problem
      lies the clash between a debt-based economy that calls for sustained
      economic growth and a world faced by increasing resource scarcity. This
      is our predicament and future generations will be perplexed when they
      study how our leaders of the free and not-so-free world were printing
      money in the hope of overcoming a temporary crisis.
      <p>
      However, this crisis is not temporary since its inherent features are
      man-made and run against the concept of a finite planet with finite
      resources and their corresponding finite extraction rates. The main
      problem is that the underlying monetary structure does not reflect these
      physical facts.
      <p>
      Given the history of the global monetary system, there should be little
      surprise that we are about to experience the last days of the existing
      arrangement. Since the 1870s, transitions towards new agreements have
      come about every 30 to 40 years. The last radical modification occurred
      when the US dollar was decoupled from a gold standard under the auspices
      of Richard Nixon. This truly enabled the USA to increase the money
      supply. How else would you have kept an economy alive in which real
      wages for workers stagnated while industrial jobs were outsourced to
      Mexico and Asia? It is a tragedy that the financial sector also
      decoupled in this process. It ceased to mirror what took place on the
      ground, meaning in the world of working and, subsequently, middle class
      people.
      <p>
      In Western democracies, economic growth was often facilitated by
      inflating debts, both publicly and privately. The genuine wealth
      previously created by domestic industry and manufacturing was now
      replaced by importing goods from other parts of the world. This holds
      true for our neighbour also. As long as foreign nations accepted the US
      dollar as payment and as long as they did not encounter limits to the
      expansion of their industrial sectors, the world could continue to grow.
      Unfortunately, this type of synergetic trade is coming to an end now.
      <p>
      Where does this leave us? This is perhaps the most pressing question
      today. It is safe to say that the monetary system will undergo great
      change; but what will the solution look like? Switching from fiat money
      to asset-backed money is an obvious candidate. However, if we were to
      choose valuable metals as our new ``gold'' standard, this may conflict
      with the plans for a sustainable energy economy that is based on
      electricity and electro-chemical energy technologies. Adding the IT
      sector to these two sectors, gold, silver, platinum and rare-earth
      metals will all be in much demand in the future economy. Given their
      limited mining potentials, it is not clear whether sufficient stockpiles
      of these metals can be accumulated so as to back a new global monetary
      scheme. In this sense, depleting resources pose a whole new challenge to
      finding an alternative to fiat money.
      <p>
      China has already begun to build a rare-earth metals storage facility.
      It could serve as a means to a) support a future currency and b) enable
      the production of alternative energy technologies. This formidable
      strategic move should provoke more discussion internationally than it
      does. Hugo Chavez’ order to bring home Venezuelan gold reserves sends a
      similar warning. Are we witnessing the first steps towards a new
      monetary system? It is high time for our intellectual elites to engage
      in this debate since nothing less than a great redistribution of wealth
      is at stake. As an individual, one can only rely on perhaps two
      investments that may navigate successfully through the impending
      tumultuous times: valuable metals and land. The advantage of scarce
      resources is that they have intrinsic value, unlike fiat money.
    </div>
  </div>
